Walmart Inc, the world's largest retailer, could be forced to publicly list its newly acquired Indian e-commerce company, Flipkart Group, within four years at the request of a small minority of Flipkart shareholders, a public filing shows.
Walmart has already signed agreement to purchase shares worth $16 billion which is 77% of Flipkart, here's how the structure of deal looks like.
As a portion of the bargain, wal mart will initially appoint five supervisors to Flipkart's plank, two supervisors will probably be appointed by minority investors whilst Bansal will take a single plank seat, as stated by the filing.
Walmart, while signing the deal, stated that the remainder of the business will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp. Minority investors holding 60% of Flipkart shares "acting together, may require Flipkart to effect an initial public offering" (IPO) four years after the close of the Flipkart-Walmart deal, the Bentonville, Arkansas-based retailer said in a 11 May filing with the US Securities and Exchange Commission.
Walmart will also have right to appoint or replace the chief executive officer and other principal executives of the Flipkart group of companies, subject to certain consultation rights of the board and the founder. "No termination fee would be payable if the share issuance agreement or the share purchase agreement were terminated", Walmart said in the filing.
For at least two years after the transactions, two of the Walmart-appointed directors will be unaffiliated with Walmart.
Walmart said it may, in future, appoint a sixth board member with the approval of the majority of the Flipkart directors.
Walmart or its components could question Flipkart to issue new common shares of up to 3 billion until the closing of their "transactions and before or on the very first anniversary of their final", it also said. Walmart's filing assumes significance at a time when Flipkart's key shareholder, Japanese internet and telecoms giant, Soft-Bank, is undecided about the sale of its shares.
Moreover, holders of 40 per cent of Flipkart shares held by the minority shareholders - or a combine holding of 9.2 per cent of the total equity - will be able to veto "certain material, non-arms' length transactions between Flipkart and Walmart". Here's what will happen in Flipkartm, if Walmart acquires 85% stake.
But Japan's SoftBank has not yet made a decision to sell its 20-22 per cent stake in Flipkart to Walmart, sources with direct knowledge of the development said.
SoftBank Chief Executive Masayoshi Son has said that their investment in Flipkart had grown to nearly $4 billion.
It said among other transfer restrictions and subject to certain exceptions, transfers of Flipkart shares will be subject to a right of first refusal exercisable by Walmart and other significant minority shareholders, and in certain situations, co-sale rights.